What factors determine your credit score?

Payment history – 35%
Amounts owed – 30%
Length of credit history – 15%
New credit – 10%
Types of credit used – 10%

Obviously the single most important factor is your record of paying your bills on time. As delinquent accounts age they factor less into the calculation of your credit score. Here is what we did to help one of my clients move into her home.

Mary was referred to me by her sister, Jane.   Mary had contacted several other lenders to get a loan, but they were not able to get her a fixed rate mortgage with a decent rate. Mary wanted to purchase a home in Vienna, Virginia and since the home was from her parent’s estate, she felt comfortable going with a two part plan to get the home and a great rate. Mary had some initial credit issues left over from a nasty divorce, where her ex had run up some credit card bills and other liabilities in her name and then left Mary to make good on the debt he actually incurred.

Once we reviewed her credit we were able to setup a two part plan. Part one was to purchase the home from the estate and part two was to clean up her credit, then refinance into an A paper program a short while later.  We chose this route because timing was critical in closing before a certain date. Mary’s income and assets were sufficient for the initial loan program used to purchase the home.

The credit plan was to reallocate some of her revolving debt over several cards, instead of just one card. We also paid down an installment account to less than ten months so we wouldn’t have to count the monthly payment in her ratios. Once we had these two items taken care of, we sent the proper documentation to the credit agency we use to have Mary’s credit rescored. The rescoring process to about seven days from start to finish, and the outcome was a score high enough to move forward with the purchase. This still left us with some follow-up credit work that needed to be done at a later time.

I am happy to say, Mary is in her house, credit scores have increased and she is a happy homeowner.